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Test: Midterm Exam Question 13 This Test: 14 pts possible Submit Test Varney's Steel Parts produces parts for the automobile industry. The company has monthly fixed expenses of $490,000 and a contribution margin of 85% of revenues. Varney feels like he is in a giant squeeze play: The automotive manufacturers are demanding lower prices, and the steel producers have increased raw material costs. Varney's contribution margin has shrunk to 60% of revenues. Varney's monthly operating income, prior to these pressures, was $343,000. Requirements 1. To maintain this same level of profit, what sales volume (in sales revenue) must Varney now achieve? 2. Varney believes that his monthly sales revenue will go only as high as $1,080,000. He is thinking about moving operations overseas to cut fixed costs. If monthly sales are $1,080,000, by how much will he need to cut fixed costs to maintain his prior profit level of $343,000 per month? Requirement 1. To maintain this same level of profit, what sales volume (in sales revenue) must Varney now achieve? Select the labels to complete the formula to compute the target sales revenue in dollars using the contribution margin approach. Then enter the amounts to calculate the new target sales in dollar Varney must now achieve. (Enter ratios as decimals. Round your answer up to the nearest whole dollar.) Sales in dollars Requirement 2. If monthly sales are $1,080,000, by how much will he need to cut fixed costs to maintain his prior profit level of $343,000 per month? Fixed expenses can only be $| |in order to maintain the prior profit level of $343,000 per month. Therefore, Varney will have to save at least $ per month in fixed costs by moving operations overseas if he plans to maintain his prior profit level. Time Remaining: 01:57:28 Next 5 6 G B N M